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Impossible Foods IPO vs. Beyond Meat IPO

IPO investors have an appetite for vegan burgers. Beyond Meat ( BYND ) has soared more than 220% from its IPO earlier this month, including a gain of more than 25% in aftermarket trading. Close competitor Impossible Foods has made three key moves indicating that it is also headed toward public markets.

This week, Impossible announced a $300 million Series E round led by Temasek and Horizons Ventures at a reported $2.0 billion valuation, bringing total funding to more than $750 million. Impossible Foods' funding round also included A-list celebrities like Jay-Z, Trevor Noah, Questlove, and Serena Williams. Meanwhile, Beyond Meat boasts celebrity endorsers like Leonardo DiCaprio, Snoop Dogg, and Kyrie Irving.

Impossible has made several key hires this year, including the former COO of Dropbox ( DBX ) and the former COO of Verifone. In both cases, the company highlighted their public company experience. Its CFO previously served as CFO of Zynga (Nasdaq: ZNGA). In March, it added the former CFO of Dropbox to its board of directors.

Impossible Foods is rapidly ramping up production, planning to double its current capacity in July. It recently won a major supply agreement with Burger King, which is currently selling the Impossible Whopper in four cities, with plans to bring the vegan burger to all 7,200 US restaurants by the end of 2019. Impossible has also begun a national roll-out of its burgers in grocers, while Asia promises to be another key growth driver. The company will likely tap public markets within a year to fund that global expansion.

But how does it taste?

Last month, in honor of the Beyond Meat IPO, the team at Renaissance Capital pitted the Beyond Burger against its fiercest rival, the Impossible Burger.

And the winner was… real beef.

Despite having mostly positive things to say about the two meat substitutes, analysts overwhelmingly preferred the taste of natural meat , with the exception of the office's vegetarians and semi-vegetarian. Our team felt that when it comes to burgers, "nothing beats the real thing." The runner-up was the Impossible Burger ; if given the choice between Beyond and Impossible, the choice was unanimous in picking Impossible.

In spite of our preferences, Beyond Meat's initial trading has shown that plant-based meat is a hot space . Beyond Meat priced $5 above the original midpoint at $25, and then soared 163% to $65.75, the IPO market's biggest first-day pop since 2015 . It has the best first-day pop for a Consumer IPO in at least 20 years.

Both companies highlight that their burgers require drastically less land and water than beef, while generating fewer greenhouse gases, and causing no harm to animals. Beyond makes a health claim too, though some analysts were turned off by its relatively high calories and sodium.

While Impossible was the clear winner, most people were generally favorable toward Beyond . In addition, Beyond Meat is arguably more "natural" since it contains no genetically-modified organisms. Either way, the market appears large enough for both, with plant-based meats generating roughly $5 billion in revenue. In its S-1, Beyond sees a path to a $35 billion market opportunity.

The Beyond Burger Founded and led by Ethan Brown and backed by Bill Gates, Kleiner Perkins, Obvious Ventures, and DNS Capital, Beyond Meat distributes its products to more than 17,000 grocers (e.g. Whole Foods, Kroger) and 12,000 restaurants (e.g. Bareburger, Carls Jr.). Its burgers are made through a proprietary process that weaves together peas, mung beans, sunflower seeds, rice, canola oil and coconut oil. The company expects to see sales growth of about 205% in the 1Q19, higher than 2018, and is now entering grilling season with a supply chain that can keep up with demand.

Here's what our analysts said about the Beyond Burger: "Better than your average veggie burger. I liked it." "Pretty good. But not like, 20x-forward-sales-good." "It had an earthy taste. Not terrible. I could see certain people liking it." "Not bad, but not great. I can taste the sodium."

The Impossible Burger Founded and led by Patrick Brown and backed by Bill Gates, GV, Khosla Ventures, UBS, Viking Global, Temasek, and Sailing Capital, Impossible Foods has raised roughly $750 million privately. While Beyond Meat's public reception makes an Impossible IPO more likely, its recent funding round means that Impossible won't need IPO capital just yet. Made from potato protein, soy protein, coconut oil, and sunflower oil, the Impossible Burger is distributed at national restaurant chains like Burger King and White Castle, and this year it is rolling out an expansion into groceries. Like Beyond, Impossible Foods has had trouble keeping up with demand.

Here's what the team had to say about the Impossible: "Looked and tasted more like a real burger." "I might like Impossible better, but I'm also more suspicious of it." "I prefer natural foods but this is a good alternative for meat eaters." The article Impossible Foods IPO vs. Beyond Meat IPO originally appeared on IPO investment manager Renaissance Capital's web site renaissancecapital.com.

Investment Disclosure: The information and opinions expressed herein were prepared by Renaissance Capital's research analysts and do not constitute an offer to buy or sell any security. Renaissance Capital's Renaissance IPO ETF (symbol: IPO) , Renaissance International ETF (symbol: IPOS) , or separately managed institutional accounts may have investments in securities of companies mentioned.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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